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Openness effects on the rule of law: Size and patterns of trade

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  • Frensch, Richard
  • Horvath, Roman
  • Huber, Stephan

Abstract

Recent literature has analyzed three main channels regarding the effect of international trade on legal institutions: overall openness to trade, a specialization on institutionally intensive exports, and a dependence on exports of natural resources. Unlike previous literature, we examine all these channels within a single regression framework. Importantly, we develop a new measure of institutional intensity of exports at the goods level based on nearly one hundred million disaggregated bilateral trade flows. Our new measure shows that goods subject to international fragmentation of production are the most institutionally intensive. Using a sample of 144 countries, our regression results show that specialization on institutionally intensive exports, especially on fragmented goods, helps countries to improve their rule of law. In addition, we find that greater openness improves the rule of law, but we fail to find any effect from natural resources exports.

Suggested Citation

  • Frensch, Richard & Horvath, Roman & Huber, Stephan, 2021. "Openness effects on the rule of law: Size and patterns of trade," International Review of Law and Economics, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:irlaec:v:68:y:2021:i:c:s014481882100051x
    DOI: 10.1016/j.irle.2021.106027
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    More about this item

    Keywords

    Trade patterns; Openness; Rule of law;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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